AI and Digital
Reshaping the future of production, management and consumption of energy
The rapid expansion of AI technologies is delivering a shock to the energy system and could well have transformative effects for the industry. Utilities and power companies are rushing to revise growth plans to respond to surging electricity needs from datacenters and energy transition demand. This is driving investment in renewables, advanced nuclear, and geothermal, but also pointing to a renewed role for natural gas. This new demand is forcing large tech companies into major players in the power sector. At the same time, generative AI and other digital technologies hold the potential to transform how energy is produced, managed and consumed and to help energy systems become more efficient and sustainable.
Power, Grid and Electrification
Policies, technologies and systems for a coming surge in demand
The electric power sector is at the forefront of the global energy transition, with wind and solar technologies matured and now deploying at scale. The electrification of the energy system and the recent emergence of power-thirsty artificial intelligence systems point to substantial demand growth for the sector, which can pose challenges for what have been seen as set targets for the future generation mix. New technologies, partnerships and policies are emerging to help the sector meet the world’s need for reliable, affordable and low emissions electricity. But standing in the way are roadblocks in the form of permitting, capital deployment, and sourcing and supply chains, all slowing grid transformation and deployment of new generation capacity.
Hydrogen and Low-Carbon Fuels
Moving from theory to execution
The hydrogen sector is moving towards real-world implementation, but not at the speed expected two years ago. Policy support and low-carbon mandates are underpinning the first projects that are creating the platform for the sector’s future growth while questions about markets and infrastructure are still being addressed. Companies are also investing in sustainable aviation fuel, renewable natural gas, and other low-carbon fuels to help reduce emissions in sectors that will be more difficult to decarbonize. What happens to policy support will be a critical variable in terms of lowering costs, improving technologies, and developing markets.
Climate and Sustainability
Policies and company strategies after COP29
COP28 marked a significant moment with major industry players committing to reducing emissions and enhancing measurement and monitoring practices. While compliance carbon markets are expanding, questions about their applicability in emerging economies and the potential convergence of voluntary and compliance carbon markets remain. The climate and sustainability agenda are facing challenges in promoting collaboration between governments and industries, as well as in establishing effective funding strategies. Points of contention include how to secure financing for energy transitions in emerging markets, providing capital for both climate adaptation and mitigation efforts, and ensuring the effective operation of carbon markets. Achieving global consensus is increasingly challenging within a polarized political and economic landscape.
Technology and Innovation
Driving performance and pace of transition
Harnessing technological innovation is critical to the energy transition. AI and other digital technologies stand out as the most broadly disruptive forces, but technological advancement is occurring across the entire energy landscape. A vibrant innovation ecosystem presents significant strategic opportunities for stakeholders to integrate new approaches into their operations. Understanding successful models of innovation will be essential for advancing technology deployment, scaling innovations, and fostering collaboration across private and public institutions. Company programs, research initiatives and start-ups all have important roles in technological advances.
Managing Emissions
Innovating to deliver emissions reductions across energy and energy-intensive industries
Delivering emissions reductions in energy-intensive sectors such as heavy industry is one of the energy transition’s biggest challenges. Decarbonization technologies such as carbon capture and storage, direct air capture, methane reduction, materials recycling and others, as well as new industrial processes, are making progress, but the scale and speed of deployment remains modest. Early projects are starting to yield lessons that will be vital for technological advancement, reducing costs and scaling up these technologies. Strategies that align industry, policymakers and capital providers can help accelerate and expand decarbonization technologies. But there is the evident risk that some decarbonization policies can impose heavy costs that make companies uncompetitive and lead to shrinkage and deindustrialization.
The Capital Transition
The role of finance in the energy transition
Finance, the fuel of energy investment, is at the center of the energy transition. Managing the current energy system while fostering new low-carbon technologies and markets will require the mobilization of significant public and private capital, in the face of policy risks, trade tensions and geopolitical disruptions. Meanwhile investors’ choices are sending mixed signals to companies about how to move to a lower emissions energy system while delivering the returns stakeholders need. The financing of the energy transition in emerging markets remains challenged as availability of capital, regulation and risk levels slow investments and capital flows.
Mobility and Transportation
Differentiated speeds towards a low-carbon system
The transportation sector's electrification shows mixed. In China, electric vehicle sales are accelerating, and the country has swiftly emerged as an EV manufacturing and export powerhouse. In the US and Europe, sales growth has slowed, and legacy auto companies are paring back their EV ambitions. The rate of EV adoption over the next decade will be pivotal for the energy transition and for oil demand. As the market evolves and fuels for the mobility sector diversify, energy, power, auto manufacturers and technology companies will develop strategies to low-carbon fuels for transportation systems but will also have to grapple with major questions in terms of consumer demand and government policies.